58.com Reports Fourth Quarter And Fiscal Year 2017 Unaudited Financial Results

Revenues

Total revenues were RMB2,764.7 million (US$423.1 million), representing an increase of 32.0% from RMB2,094.8 million in the same quarter of 2016.

Membership revenues were RMB1,038.8 million (US$159.0 million), an increase of 27.9% from RMB812.0 million in the same quarter of 2016. The increase in membership revenues was primarily driven by an increase in the number of subscription-based paying membership accounts. The total number of subscription-based paying membership accounts on the Company's platforms, which include 58.com, Ganji.com and Anjuke.com, was approximately 2,654,000 during the fourth quarter of 2017, a 28.2% increase from approximately 2,070,000 in the same quarter of 2016. The Company defines subscription-based paying membership accounts as the registered accounts through which users have purchased the Company's membership subscriptions. The number of subscription-based paying membership accounts in a given period represents the paying merchant members whose membership subscriptions are in their service period at any point during the given period. Some paying merchant members purchase membership services from more than one Company platform which contributes separately to the revenues of each platform.

Online marketing services revenues were RMB1,644.5 million (US$251.7 million), an increase of 38.3% from RMB1,189.4 million in the same quarter of 2016. The increase was primarily driven by the increasing adoption and effectiveness of the Company's various online marketing services such as real-time bidding, priority listing and various other online marketing services.

Cost of Revenues

Cost of revenues was RMB262.9 million (US$40.2 million), an increase of 23.8% from RMB212.2 million in the same quarter of 2016. The year-over-year increase in the 58.com's cost of revenues was primarily driven by increases in salaries and benefits for customer service staff and costs of used goods sold.

Gross Profit and Gross Margin

Gross profit was RMB2,501.8 million (US$382.9 million), an increase of 32.9% from RMB1,882.5 million during the same quarter of 2016.

Gross margin was 90.5%, compared with 89.9% during the same quarter of 2016.

Operating Expenses

Operating expenses were RMB1,888.1 million (US$289.0 million), an increase of 11.8% from RMB1,689.0 million in the same quarter of 2016.          

Sales and marketing expenses in the fourth quarter of 2017 were RMB1,338.6 million (US$204.9 million), an increase of 9.3% from RMB1,224.7 million in the same quarter in 2016.

Within sales and marketing expenses, advertising expenses accounted for RMB511.9 million (US$78.3 million) and RMB454.4 million in the fourth quarter of 2017 and 2016, respectively. The increase was primarily due to an increase in advertising expenses associated with the promotion of the 58.com and Zhuan Zhuan brands.

Other sales and marketing expenses in the fourth quarter of 2017 were RMB826.7 million (US$126.6 million), an increase of 7.3% from RMB770.3 million in the same quarter in 2016. Other sales and marketing expenses primarily include salaries, benefits and sales commissions, as well as office overhead expenses associated with sales, customer service and marketing teams. The increase was primarily driven by increased commissions for the Company's sales, customer service and marketing teams.

Research and development expenses in the fourth quarter of 2017 were RMB357.9 million (US$54.8 million), an increase of 14.2% from RMB313.4 million in the same quarter of 2016.  The increase was primarily due to increased salaries and benefits as well as share-based compensation expenses for the research and development of new features and services.

General and administrative expenses in the fourth quarter of 2017 were RMB191.6 million (US$29.3 million), an increase of 27.0% from RMB150.9 million in the same quarter of 2016. The increase was primarily driven by an increase in salaries, share-based compensation expenses and other administrative related expenses.

Income from Operations

Income from operations was RMB613.7 million (US$93.9 million) in the fourth quarter of 2017, compared with income from operations of RMB193.5 million in the same quarter of 2016. Operating margin, defined as income from operations divided by total revenues, was 22.2% in the fourth quarter of 2017, compared with 9.2% in the same quarter of 2016.

Non-GAAP income from operations was RMB762.5 million (US$116.7 million) in the fourth quarter of 2017, compared with non-GAAP income from operations of RMB317.7 million in the same quarter of 2016. Non-GAAP operating margin, defined as non-GAAP income from operations divided by total revenues, was 27.6% in the fourth quarter of 2017, compared with 15.1% in the same quarter of 2016.

Other Expenses

Other expenses in the fourth quarter of 2017 were RMB123.8 million (US$19.0 million), compared with other expenses of RMB365.5 million in the same quarter of 2016. Other expenses in the fourth quarter of 2017 mainly included a RMB198.3 million share of results of equity investees, which primarily consisted of a RMB186.4 million share of the net loss attributable to 58 Home's ordinary shareholders calculated based on the Company's ordinary shareholding in 58 Home, which was partially offset by investment income of RMB27.5 million and government subsidies of RMB25.7 million.

Net Income/(Loss) Attributable to 58.com Inc.

Net income attributable to 58.com Inc. was RMB414.1 million (US$63.4 million) in the fourth quarter of 2017, compared with net loss attributable to 58.com Inc. of RMB138.0 million in the same quarter of 2016. Net margin, defined as net income /(loss) attributable to 58.com Inc. divided by total revenues, was 15.0% in the fourth quarter of 2017, compared with negative 6.6% in the same quarter of 2016.

Non-GAAP net income attributable to 58.com Inc. was RMB549.0 million (US$84.0 million) in the fourth quarter of 2017, compared with non-GAAP net loss attributable to 58.com Inc. of RMB22.7 million in the same quarter of 2016. Non-GAAP net margin, defined as non-GAAP net income /(loss) attributable to 58.com Inc. divided by total revenues, was 19.9% in the fourth quarter of 2017, compared with negative 1.1% in the same quarter of 2016.

Basic and Diluted Earnings per ADS

Basic and diluted earnings per ADS attributable to ordinary shareholders in the fourth quarter of 2017 were RMB2.82 (US$0.43) and RMB2.78 (US$0.43), compared with basic and diluted losses per ADS attributable to ordinary shareholders of RMB0.95, in the same quarter of 2016.

Non-GAAP basic and diluted earnings per ADS attributable to ordinary shareholders in the fourth quarter of 2017 were RMB3.74 (US$0.57) and RMB3.69 (US$0.56), respectively, compared with non-GAAP basic and diluted losses per ADS attributable to ordinary shareholders of RMB0.16 in the same quarter of 2016.

Cash Flow

Net cash provided by operating activities was RMB875.8 million (US$134.0 million) in the fourth quarter of 2017, compared with net cash provided by operating activities of RMB842.2 million in the same quarter of 2016.

Fiscal Year 2017 Financial Results

Revenues

Total revenues were RMB10,068.8 million (US$1,540.9 million), representing an increase of 32.6% from RMB7,592.1 million during fiscal year 2016.

Membership revenues were RMB3,789.5 million (US$580.0 million), an increase of 28.4% from RMB2,951.1 million during fiscal year 2016. The increase in membership revenues was primarily driven by an increase in the number of subscription-based paying membership accounts. The number of quarterly average paying membership accounts on the Company's platforms, which include 58.com, Ganji.com and Anjuke.com, was approximately 2,485,000 during fiscal year 2017.

Online marketing services revenues were RMB5,978.5 million (US$915.0 million), an increase of 37.0% from RMB4,363.8 million during fiscal year 2016. The increase was primarily driven by the increasing adoption and effectiveness of the Company's various online marketing services such as real-time bidding, priority listing and various other online marketing services.

Cost of Revenues

Cost of revenues was RMB925.5 million (US$141.6 million), an increase of 30.9% from RMB707.2 million during fiscal year 2016. The year-over-year increase was primarily driven by increases in salaries and benefits for customer service staff, costs of used goods sold, and other types of website maintenance-related costs such as depreciation expenses.

Gross Profit and Gross Margin

Gross profit was RMB9,143.3 million (US$1,399.3 million), an increase of 32.8% from RMB6,884.9 million during fiscal year 2016.

Gross margin was 90.8%, compared with 90.7% during fiscal year 2016.

Operating Expenses

Operating expenses were RMB7,346.8 million (US$1,124.4 million), representing an increase of 10.5% from RMB6,651.2 million during fiscal year 2016.

Sales and marketing expenses in fiscal year 2017 were RMB5,212.4 million (US$797.7 million), an increase of 5.5% from RMB4,941.4 million during fiscal year 2016.

Within sales and marketing expenses, advertising expenses accounted for RMB2,087.1 million (US$319.4 million) and RMB2,040.0 million during fiscal year 2017 and 2016, respectively. The increase was primarily due to an increase in advertising expenses associated with the promotion of the 58.com and Zhuan Zhuan brands.

Other sales and marketing expenses in fiscal year 2017 were RMB3,125.3 million (US$478.3 million), an increase of 7.7% from RMB2,901.4 million during fiscal year 2016. Other sales and marketing expenses primarily include salaries, benefits and sales commissions as well as office overhead expenses associated with sales, customer service and marketing teams. The increase was primarily driven by increased commissions and share-based compensation expenses for the Company's sales, customer service and marketing teams.

Research and development expenses in fiscal year 2017 were RMB1,368.4 million (US$209.4 million), an increase of 23.5% from RMB1,107.9 million during fiscal year 2016. The increase was primarily due to increased salaries and benefits as well as share-based compensation expenses associated with the hiring of additional employees for research and development of new features and services.

General and administrative expenses in fiscal year 2017 were RMB766.0 million (US$117.2 million), an increase of 27.3% from RMB601.9 million during fiscal year 2016. The increase was primarily driven by an increase in salaries, share-based compensation expenses and other administrative related expenses.

Income from Operations

Income from operations was RMB1,796.5 million (US$274.9 million) in fiscal year 2017, compared with income from operations of RMB233.7 million during fiscal year 2016. Operating margin was 17.8% in fiscal year of 2017, compared with 3.1% during fiscal year 2016.

Non-GAAP income from operations was RMB2,359.2 million (US$361.1 million) in fiscal year 2017, compared with non-GAAP income from operations of RMB730.0 million during fiscal year 2016. Non-GAAP operating margin was 23.4% during fiscal year 2017, compared with 9.6% during fiscal year 2016.

Other Expenses

Other expenses in fiscal year 2017 were RMB260.5 million (US$39.9 million), compared with other expenses of RMB1,057.7 million during fiscal year 2016. Other expenses in fiscal year 2017 mainly included a RMB687.4 million share of results of equity investees, which primarily consisted of a RMB663.2 million share of the net loss attributable to 58 Home's ordinary shareholders calculated based on the Company's ordinary shareholding in 58 Home, which was partially offset by investment income of RMB342.2 million and government subsidies of RMB81.4 million.

Net Income/(Loss) Attributable to 58.com Inc.

Net income attributable to 58.com Inc. was RMB1,285.1 million (US$196.7 million) in fiscal year 2017, compared with net loss attributable to 58.com Inc. of RMB783.8 million during fiscal year 2016. Net margin was positive 12.8% in fiscal year of 2017, compared with negative 10.3% during fiscal year 2016.

Non-GAAP net income attributable to 58.com Inc. was RMB1,795.0 million (US$274.7 million) in fiscal year 2017, compared with non-GAAP net loss attributable to 58.com Inc. of RMB253.6 million during fiscal year 2016. Non-GAAP net margin was positive 17.9% in fiscal year 2017, compared with negative 3.4% during fiscal year 2016.

Basic and Diluted Earnings/(Loss) per ADS

Basic and diluted earnings per ADS attributable to ordinary shareholders in fiscal year 2017 were RMB8.82 (US$1.35) and RMB8.70 (US$1.33), compared with basic and diluted losses per ADS attributable to ordinary shareholders of RMB5.46, during fiscal year 2016.

Non-GAAP basic and diluted earnings per ADS attributable to ordinary shareholders in fiscal year 2017 were RMB12.32 (US$1.89) and RMB12.16 (US$1.86), respectively, compared with non-GAAP basic and diluted losses per ADS attributable to ordinary shareholders of RMB1.77 during fiscal year 2016.

Cash Flow

Net cash provided by operating activities was RMB2,697.3 million (US$412.8 million) in fiscal year 2017, compared with net cash provided by operating activities of RMB1,887.8 million during fiscal year 2016.

Cash and Cash Equivalents and Short-term Investments

As of December 31, 2017, the Company had cash and cash equivalents and short-term investments of RMB4,962.7 million (US$759.5 million).

Shares Outstanding

As of December 31, 2017, the Company had a total of 293,965,131 ordinary shares (including           245,924,871 Class A and 48,040,260 Class B ordinary shares) issued and outstanding. One ADS represents two Class A ordinary shares.

Business Outlook

Based on the Company's current operations, total revenues for the first quarter of 2018 are expected to be between RMB2,290 million and RMB2,390 million. This represents a year-over-year increase of 15.2% to 20.2% in Renminbi amounts. These estimates reflect the Company's current and preliminary view, which is subject to change.

Non-GAAP Financial Measures           

To supplement the financial measures prepared in accordance with generally accepted accounting principles in the United States, or GAAP, this press release presents non-GAAP income/(loss) from operations, non-GAAP operating margin, non-GAAP net income/(loss) attributable to 58.com Inc., non-GAAP net margin and non-GAAP basic and diluted earnings/(loss) per share and per ADS by excluding share-based compensation expenses of the Company (net of the amount allocated to noncontrolling interests), amortization of intangible assets resulting from business acquisitions, share-based compensation expenses included in share of results of equity investees, loss on conversion of Guazi Convertible Note, gain on deconsolidation and disposal of business and income tax effects of GAAP to non-GAAP reconciling items. The Company believes these non-GAAP financial measures are important to help investors understand the Company's operating and financial performance, compare business trends among different reporting periods on a consistent basis and assess the Company's core operating results, as they exclude certain expenses that are not expected to result in cash payments.  The use of the above non-GAAP financial measures has certain limitations. Share-based compensation expenses, amortization of intangible assets resulting from business acquisitions, non-cash gain or loss and income tax effects resulting from GAAP to non-GAAP reconciling items have been and will continue to be incurred in the future and are not reflected in the presentation of the non-GAAP financial measures, but should be considered in the overall evaluation of the Company's results. The Company compensates for these limitations by providing the relevant disclosure of its share-based compensation expenses of the Company (net of the amount allocated to noncontrolling interests), amortization of intangible assets resulting from business acquisitions, share-based compensation expenses included in share of results of equity investees, loss on conversion of Guazi Convertible Note, gain on deconsolidation and disposal of business and income tax effects of GAAP to non-GAAP reconciling items, all of which should be considered when evaluating the Company's performance. These non-GAAP financial measures should be considered in addition to financial measures prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, financial measures prepared in accordance with GAAP. Reconciliation of each of these non-GAAP financial measures to the most directly comparable GAAP financial measure is set forth at the end of this release.

Conference Call

58.com's management will host an earnings conference call on Thursday, March 8, 2018 at 8:00 a.m. U.S. Eastern Time (9:00 p.m. Beijing / Hong Kong time on the same day).

Dial-in details for the earnings conference call are as follows:

Please dial in 15 minutes before the call is scheduled to begin and provide the passcode to join the call.

A telephone replay of the call will be available after the conclusion of the conference call through 8:00 a.m. U.S. Eastern Time, March 15, 2018. The dial-in details for the replay are as follows:

Additionally, a live and archived webcast of the conference call will be available on the Investor Relations section of 58.com's website at http://ir.58.com.  

About 58.com Inc.

58.com Inc. (NYSE: WUBA) operates China's largest online marketplace for classifieds, as measured by monthly unique visitors on both its www.58.com website and mobile applications. The Company's online marketplace enables local merchants and consumers to connect, share information and conduct business. 58.com's broad, in-depth and high quality local information, combined with its easy-to-use website and mobile applications, has made it a trusted marketplace for consumers. 58.com's strong brand recognition, large and growing user base, merchant network and massive database of local information create a powerful network effect. 

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